Investment update 23 April 2018

Last week in the markets

Over the past week Australian shares were up 0.7% with small company shares rising 1.1%. Shares in developed countries rose 0.5% with the US market up 0.5%. Shares in emerging markets were down 0.2%. The Australian dollar fell 1.2% to 76.72 US cents. The Australian 10-year bond yield rose to 2.81% while the US 10-year bond yield increased to 2.96%. The oil price rose 1.5% to 68.38 US dollars per barrel.

Updating our economic views

Last week we detailed our recently reviewed core economic scenario, titled ’Late stage synchronised growth, well managed’. This scenario is reasonably supportive of long term investments in growth assets.

However, forecasting economic outcomes is always difficult. To counter this, we consider a range of possible economic scenarios. We consider the next most likely scenario to be ‘Late stage synchronised growth, policy mistakes’.

We believe the potential for policy mistakes is reasonably high. Policy mistakes could occur in many areas, primarily:

Risk of war - a decision to go to war may have follow-on consequences which negatively impact economic growth.

Compared to our core economic scenario, this alternative scenario is less attractive. An economic slowdown is likely to be deeper and more prolonged. This would be a less appealing environment for investing in growth assets.

This is general information only and does not take into account your financial situation, needs or objectives. Before acting, consider if the information is right for your needs and circumstances and read the relevant Product Disclosure Statement. This information is based on our understanding of current Australian laws and assumes they will remain unchanged. Any links to external sites are for information purposes only and are not an endorsement. We take no responsibility for the content.